According to Bloomberg, Orco’s vice-president Arnaud Bricout expects company to beat its initial 2007 sales guidance of EUR 223m by 10 to 15 percent. Orco will officially adjust its guidance on 30 August together with their 1H2007 results or on 12 September during an analyst meeting. Besided he expects net income for 2Q2007 will probably be “much better” than in 1Q2007. Following a recent capital increase, at least a third of funds raised will be spend in Poland where Orco plans more than 60 investments. These includes residential projects in capital Warsaw as well as regional Polish cities of Sopot, Bialystok, Lublin or Szczecin. It may also build a shopping center in Krakow. In addition Orco plans acquisition of unspecified construction companies. Orco doesn’t plan to buy land in new markets including Bulgaria and Romania this year and won’t issue any more new shares through December, Bricout said.
Our view: Based on above mentioned statements 10 to 15 percent upgrade of sales forecast indicate figure of EUR 245 to 256m. Our current 2007 sales forecast stands at EUR 228m as it doesn’t include effect of GSG acquisition yet, which could in our opinion add some EUR 20-25m to the top line in 2007. We see step into secondary Polish cities as a good move, however lags behind GTC in this respect. The plans of no expansion into Romania and Bulgaria could be seen negatively as these markets provide higher potential in yield convergence, however should Orco is able to secure more deals in Russia, this could be seen even more positively. Overall, we believe that the pressure on Orco’s price is over and we could await positive news flow in coming months. We reiterate our Buy recommendation.